Mortgage Rates Rise To New 2018 High

April 20, 2018

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Mortgage rates are marching higher again, with the cost to borrow money
to purchase a home hitting a new high for the year. According to Freddie Mac,
for the week that ended April 19, the average rate for a 30-year fixed-rate
mortgage increased five basis points to 4.47%, the highest level since
January 2014. Freddie Mac said that this also marks the largest weekly increase
since February 2018.

Rates were pushed higher as Treasury yields increased. "According
to the Beige Book, economic activity in March and early April continued to
expand at a moderate pace; however, there is concern from various
industries surrounding tariffs," said Freddie Mac in announcing weekly
mortgage rates. "Following Treasurys, mortgage rates soared."

As borrowers are faced with increased costs to access money and rising
home prices, Freddie Mac said it has found that shopping for a loan with
more than one mortgage lender can get consumers a better interest rate. In
addition to the 30-year fixed-rate mortgage interest increasing, Freddie Mac
reported that the interest rate on a 15-year fixed-rate mortgage ended the week
at 3.94%, 0.07 basis points higher, while the interest rate on a five-in-one
adjustable-rate mortgage stood at 3.67%, up 0.06 basis points for the week and
0.57 basis points higher on a year-over-year basis.

With the spring real estate season in full swing, there are concerns
that rising rates on mortgages, a lack of affordable housing inventory and
increasing home prices could shut a lot of borrowers out of the market. That is
particularly true for first-time buyers who are extremely price sensitive. But
those fears may prove to be unfounded given a nearly 5% increase in mortgage
applications for last week. According to new data from the Mortgage Bankers
Association, applications for new home loans increased 4.9% in the week ending April
13. Refinance applications were up 4% from the week earlier, while purchase
applications jumped 6%.

Buyers could be entering the market now to get ahead of interest rates
that could go even higher, helping the all-important spring real estate season.
The uptick in mortgage applications also comes on the back of two weeks of
declines from those seeking to apply for a home loan. "The rapid growth in
home prices and the slight increase in rates are headwinds, but we think the
economic and demographic fundamentals will prove stronger," said Michael
Fratantoni, the chief economist at the Mortgage Bankers Association, when
announcing the weekly applications data. "Beyond that, we are seeing what
looks like typical or better seasonal improvements in homebuyer demand."